The case of the HPO framework
- Purpose – An important question in contemporary research is: do certain management practices cause better performance or do better performing organizations find it easier to adopt certain management practices? This question is also of importance when applying the high performance organization (HPO) framework, which is a scientifically validated technique designed to achieve and sustain a high level of performance. Many research studies correlate the HPO framework with improved organizational performance. There are, however, no studies which explicitly look at the causal relationship. This paper aims to provide empirical evidence of causality.
- Design/methodology/approach – Longitudinal research was conducted at two companies. An HPO diagnosis was conducted at each company, after which management implemented the HPO framework. Two units at each company were selected as case studies. Data were collected, using a questionnaire and interviews, at the beginning and after 18 months, when the diagnoses were repeated. A linear regression analysis was performed to interpret the data.
- Findings – Despite exposure to the same HPO framework techniques, organizational units achieved significantly different outcomes. In each company, one unit achieved a higher HPO score and higher organizational results, while the other unit had no change, or a lower HPO score and lower organizational results. The key factor was the manner in which unit managers applied the HPO framework.
- Practical implications – Optimal effectiveness for the HPO framework occurs when management incorporates the HPO factors into the workplace and strives diligently to improve performance.
- Originality/value – This research responds to the question “Do certain management practices cause better performance or do better performing organizations find it easier to adopt certain management practices?”
- Keywords: High performance organizations, Financial performance, Organizational performance, Management practices, Causality, Management quality
- Paper type: Research paper
1. Introduction
An issue which has for a long time occupied researchers investigating the effects of management practices on organizational performance is
the direction of causality (Morrison, 2012). This issue centers around the question: do certain management practices cause better performance, or do better performing organizations find it easier to adopt certain management practices? (Bloom et al., 2013a). Management researchers who study the connections between organizations practicing certain management techniques and performance find positive correlations between the two. However, evidence of a positive correlation is not sufficient to establish with certainty that certain management practices will lead to improved performance, and not the other way around. It could even be the case that there is reciprocal causality wherein feedback occurs, with management practices and organizational performance influencing and interacting with each other (Granger, 1969; Dent, 2003; Battisti and Iona, 2009). Although this causal ambiguity has not prevented consultants and management writers from claiming that their techniques and frameworks, when executed properly, will increase organizational performance, in reality, many of these have proclaimed that “miracle cures” have had, at best, a short-lasting positive effect (Parnell et al., 2012).
The issue of causality has become increasingly important as managers are struggling to choose and then allocate scarce resources to those management practices which will help, at least with a certain degree of certainty, them to improve their organization. This paper describes a study which evaluates whether applying a specific management practice, in this case de Waal’s (2012a, 2012b, 2012c) high performance organization (HPO) framework, has a measureable positive impact on the performance of organizations. Our research question therefore is: Can causality be proven to flow from implementation of the HPO framework to organizational performance? Our hypothesis is that for the companies studied, their organizational performance is increased by applying the HPO framework (i.e. causality flows from applying the HPO framework to organizational performance), and not that because companies have increased organizational performance, they are able to apply the HPO framework (i.e. causality flows from to organizational performance to the application of the HPO framework). This research fills a gap in the current literature as it aims to show causality going from a management practice to organizational performance.
This paper is structured as follows. Section 2 discusses recent literature about the relation between management practices and performance improvement, followed by a description of the development of the HPO framework and HPO implementation studies in Section 3.
Sections 4 and 5 describe the two case companies and the research methodology. The results of the research are subsequently analyzed and discussed. The conclusion suggests practical implications of the study findings, states limitations of the research presented in this paper and offers suggestions for future research.
2. Literature review
There is much literature that shows that some organizations achieve better performance than competitors, but the causes of this outperformance are ambiguous (Keller, 2011). The difference in performance could be due to local circumstances, types of products and services delivered, historical developments, cultural differences, industry complexity or even sheer luck (Parnell et al., 2012). In addition, many of the studies show that correlations exist between the techniques and methods organizations apply and the organizational performance they achieve, but these studies do not show the direction of these correlations.
This leaves open the issue of causality: does applying certain management practices lead to improved performance, or do organizations with improved performance have the means to apply certain management practices?
Causality in management studies is not easy to establish as there are quite a few variables that influence organizational performance (Morrison, 2012). There are studies that use mathematical formulas (such as the Granger causality formula) to test for causality. For
example, Jin (2009) looked at the causality between research productivity and economic growth in five East Asian economies; Al-Khulaifi (2012) investigated the causality between…